Review of Finance

Investor Attention and Asset Pricing Anomalies*
1
School of Economics and Management, Tsinghua University, 2 School of Banking and Finance,
University of International Business and Economics, 3 Baruch College, City University of New York
and 4 Warrington College of Business, University of Florida
Abstract
We investigate the relationship between investor attention and financial market
anomalies. We find that anomaly returns tend to be higher following high-attention
days. The result is robust after controlling for the effect of news and in a natural ex-
periment setting in which a stock market regulation and rounding errors generate
exogenous variations in attention. An analysis of order imbalances suggests that
large traders trade on anomaly signals more aggressively upon observing higher at-
tention. We discuss the extent to which the findings are driven by inattention-driven
underreaction, bias amplification, or coordinated arbitrage mechanisms, thereby
providing insight into the understanding of anomalies.